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Brent Crude Rises From Nine-Month Low on Iraqi Unrest; WTI Gains

Aug. 7 (Bloomberg) -- Brent crude advanced from a nine- month low after militants captured a dam in Iraq, bolstering concern that unrest will spread in OPEC’s second-biggest oil producer. West Texas Intermediate futures also climbed.

Militants from an al-Qaeda breakaway group in Iraq captured the country’s largest dam, whose destruction could flood Mosul, according to an employee on site and local officials. President Barack Obama is considering airstrikes in Iraq, the New York Times reported, citing unidentified administration officials. WTI dropped to a six-month low earlier on speculation that falling U.S. refinery utilization rates will reduce crude demand.

“The news coming out of Iraq today is cause for concern,” Tom Finlon, Jupiter, Florida-based director of Energy Analytics Group LLC, said by phone. “Brent is accelerating more than WTI, which makes sense because it’s much more sensitive to issues of international supply.”

Brent for September settlement climbed 76 cents, or 0.7 percent, to $105.35 a barrel on the London-based ICE Futures Europe exchange at 12:47 p.m. in New York. It closed at $104.59 a barrel yesterday, the lowest since Nov. 7. The volume of all futures traded was 18 percent above the 100-day average.

WTI for September delivery gained 24 cents, or 0.3 percent, to $97.16 a barrel on the New York Mercantile Exchange. It touched $96.55 earlier, the lowest intraday price since Feb. 4. Volumes were 22 percent higher than the 100-day average. Brent traded at an $8.19 premium to WTI.

Dam Control

Control of the dam gives Islamic State “a hand around the throat” of the country, Michael Stephen, deputy director of the Royal United Services Institute in Qatar, said by phone. The group will have “leverage over Baghdad, over Mosul, a lot of big civilian areas,” as well as the ability to “shut down army movement, shut down cities,” he said. “I don’t think they are going to blow it up because it would be destroying their own power base.”

WTI reached a nine-month high in June after militants from the breakaway al-Qaeda group captured the city of Mosul. Futures dropped when the rebel advance stalled, sparing the country’s south, home to more than three-quarters of its oil output.

Fuel prices rose a second day after the EIA report showed that supplies fell last week as demand grew. Gasoline stockpiles dropped 4.39 million barrels in the week ended Aug. 1, the biggest decline since April. Demand for the motor fuel rose 3.9 percent to 9.36 million barrels a day, the most since June 2011.

Distillate Inventories

Inventories of distillate fuel, a category that includes heating oil and diesel, slipped by 1.8 million barrels last week, the first decline since May, yesterday’s EIA report showed. Consumption increased 5.2 percent to 4.03 million barrels in the seven days ended Aug. 1, the most since May.

Gasoline futures for September delivery rose 2.43 cents, or 0.9 percent, to $2.764 a gallon on the Nymex. The fuel closed at $2.7155 Aug. 5, the lowest settlement since February.

Ultra low sulfur diesel for September delivery advanced 2.25 cents, or 0.8 percent, to $2.8986 a gallon.

The crack spread, the profit to process three barrels of oil into two of gasoline and one of heating oil, increased to $20.76 a barrel based on September futures. The front-month 3-2-1 spread was the highest since July 15.

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